L&Q delivers solid financial results which pave the way for record investment in homes and services
L&Q today announces financial results which show how it has performed strongly throughout the pandemic and laid the foundations for a record £1.9bn investment in homes and services.
In the year-ended 31 March 2021, L&Q achieved a surplus of £208m, EBITDA of £374m, a 23% year-on-year increase, with net debt at £5.3bn, a £44m year-on-year decrease. It has delivered a material improvement in EBITDA margins, interest coverage and debt metrics that are ahead of previous guidance, and reflect stronger than expected financial performance during the pandemic, particularly in relation to completions, sales and rent arrears. Available liquidity at greater than £1.1bn demonstrates that L&Q has also been successful in implementing prudent measures to conserve cash flows.
While the pandemic has impacted L&Q’s repairs and maintenance service, £190m (2020: £231m) was invested in residents’ homes, which includes investment in fire safety works. The safety of residents and staff is L&Q’s number one priority, and it is delivering one of the UK’s largest building inspection programmes. Since the Grenfell tragedy L&Q has already spent over £100m on building safety. More than £20m has been spent on the installation of Waking Watches or temporary fire alarm systems where necessary, which has not been recharged to residents.
Over the next seven years, £1.9bn will be invested to transform existing homes and neighbourhoods, in what is believed to be the largest housing investment programme ever undertaken by the sector. Of this, £339m has been committed to fire safety works, with further substantial investment to maintain Decent Homes standards, major internal and external works, estate improvements, and energy works to reduce carbon emissions. This investment will be in addition to spending on routine repairs and servicing to ensure the quality and safety of homes.
Group Finance Director Waqar Ahmed said: “Despite the extraordinary operating environment of the past year, L&Q’s flexibility, agility, discipline, strong governance and the ongoing support of our lenders and investors demonstrates how financially robust the L&Q Group is.
“Earlier this year, we launched a new five-year corporate strategy which prioritises investment in safety and the quality of residents’ homes and services. Because of our strong financial performance, we are able to commit to a landmark £1.9bn housing investment programme. This will enable us to make substantial improvements to residents’ homes and neighbourhoods across the country.”
Mr Ahmed added: “This renewed focus on residents’ homes and services will not diminish L&Q’s commitment to tackling the UK housing crisis through investment in new homes and Modern Methods of Construction with an annual programme of at least 3,000 completions projected for the medium term. We will also continue supporting vulnerable residents and awarding grants to causes that promote aspiration, confidence and opportunity through the L&Q Foundation, which is now in its tenth year.”
Despite the on-set of the pandemic and temporary closure of construction sites last year, housing completions at 2,699 (2020: 2,439) are up 11% year-on-year, of which 58% (2020: 49%) are for social housing tenures. This shift in the balance of tenure further demonstrates L&Q’s commitment to maximising its social purpose, while simultaneously, lowering its risk profile for commercial activity.
A commitment to supporting communities has also continued with another £8m invested through the L&Q Foundation. For every £1 invested L&Q has created over £3 of social value, and supported thousands of people throughout the pandemic.
The last year has also seen L&Q Living providing care and support services to people with a wide range of needs throughout the pandemic. This includes older people, people with learning difficulties and mental health needs, and people affected by homelessness.
NOTES TO EDITORS
The following figures are selected highlights from L&Q’s Financial Statements 2021.
- Turnover increased by £137m to £1,052m (2020: £915m), the highest L&Q has ever achieved. Of this, 57% was generated from core social housing lettings activities (2020: 62%). A further 35% (2020: 30%) of turnover was from market sales activity, 4% (2020: 5%) from market rents and 4% other (2020: 3%).
- EBITDA increased by 23% in the year to £374m. EBITDA MRI interest cover was 254% (2020: 193%), comfortably above lender covenants, and the EBITDA margin was 30% (2020: 26%).
- Surplus after tax was £208m, which was £29m ahead of like for like performance in the previous year (2020: £414m, which included the £235m gift on acquisition of THT)). Every penny of this will be reinvested into L&Q’s social purpose.
- Net debt reduced to £5.3bn (2020: £5.4bn) through careful cash conservation and management during the year enabling a repayment of loans.
- The Group continues to maintain a strong financial position with net assets increasing by £186m to £5,413m in the year (2020: £5,227m). The housing properties portfolio grew by £351m to £10,906m (2020: £10,555m) with the additions from a mix of capital maintenance works and continued growth from the development programme.
- During the year L&Q invested £523m (2020: £882m) in new social housing, as it makes progress with its ambition to tackle the housing crisis. A further £38m (2020: £86m) was invested in private housing developed in-house and £23m (2020: £55m) in partnerships through joint ventures to generate profits to re-invest in the delivery of social housing.
- Total reserves stand at £5,413m (2020: £5,227m).
- Despite operational challenges as a result of the pandemic, customer satisfaction with maintenance services remained unchanged at 71%.
- Top tier regulatory ratings were retained, with a G1 for governance and a V1 for viability.
- At date of publication, L&Q’s credit ratings are unchanged at A+/Stable (Fitch), A3/Stable (Moodys) and A-/Stable (S&P).
- The CQC rated 100% of care schemes as outstanding or good.